SCHEDULES
SCHEDULE 5Factoring of income etc: new Chapters 5B and 5C of Part 13 of ITA 2007
7
After section 809BZS insert—
Chapter 5CLoan or credit transactions
809CZALoan or credit transaction defined
1
This section defines a loan or credit transaction for the purposes of sections 809CZB and 809CZC.
2
A transaction is a loan or credit transaction if it is—
a
effected with reference to the lending of money or the varying of the terms on which money is lent, or
b
effected with a view to enabling or facilitating an arrangement concerning the lending of money or the varying of the terms on which money is lent.
3
A transaction is a loan or credit transaction if it is—
a
effected with reference to the giving of credit or the varying of the terms on which credit is given, or
b
effected with a view to enabling or facilitating an arrangement concerning the giving of credit or the varying of the terms on which credit is given.
4
Subsection (2) has effect whether the transaction is effected—
a
between the lender and borrower,
b
between either of them and a person connected with the other, or
c
between a person connected with one and a person connected with the other.
5
Subsection (3) has effect whether the transaction is effected—
a
between the creditor and debtor,
b
between either of them and a person connected with the other, or
c
between a person connected with one and a person connected with the other.
809CZBCertain payments treated as yearly interest
1
This section applies if a loan or credit transaction provides for a payment which is not interest but is—
a
an annuity or other annual payment falling within Part 5 of ITTOIA 2005 and chargeable to income tax otherwise than as relevant foreign income, or
b
an annuity or other annual payment which is from a source in the United Kingdom and chargeable to corporation tax under Chapter 5 of Part 10 of CTA 2009 (distributions from unauthorised unit trusts) or Chapter 7 of that Part (annual payments not otherwise charged).
2
The payment must be treated for the purposes of the Income Tax Acts as if it were a payment of yearly interest (see, in particular, section 874).
809CZCTax charged on income transferred
1
This section applies if—
a
under a loan or credit transaction a person transfers income arising from property,
b
the person is not, as a result of Chapter 5B (finance arrangements), chargeable to income tax on the income transferred, and
c
the person is within the charge to income tax.
2
In such a case—
a
income tax is charged under this section,
b
the tax is charged on an amount equal to the full amount of the income transferred,
c
the tax is charged for the tax year in which the transfer takes place, and
d
the person who transfers the income is liable for the tax.
3
This section does not prejudice the liability of any other person to tax.
4
For the purposes of this section a person transfers income if the person surrenders, waives or forgoes it.
5
Subsection (6) applies for the purposes of this section if—
a
credit is given for the purchase price of property, and
b
the rights attaching to the property are such that the buyer's rights to income from the property are suspended or restricted during the life of the debt.
6
The buyer must be treated as surrendering income of an amount equal to the income the buyer in effect forgoes by obtaining the credit.
7
For the purposes of this section an amount of income payable subject to deduction of income tax must be taken as the amount before deduction of tax.